1.

1 Introduction:
The Jews in Jerusalem a kind of banking in the form of money-lending before the
birth of Christ. The word “bank” as during ancient time Jews used to do money-
lending business sitting on long benches. Bank plays an important role in the business
sectors and in the industrialization of a country. Basically the banks take deposits
from the customers against interest or profit and lend it to the borrowers against
interest or profit for a cessation period.
As a developing country, Bangladesh has several production sectors which have
greater contribution on GDP. They are playing an important role over our GDP. The
major sectors in this issue are: Agriculture, Industry and Services sectors. Industry
sectors consist of trade service, construction, storage and communication, housing,
public administration and defense, education, health, financial intermediates such as
bank, insurance and other social and personal activities.
Banking sector of Bangladesh is one of the major sectors which contribute
significantly to the national economy. The sector compromises a number of banks in
various categories. Considering ownership the sector can be classified into four major
categories, such as: Nationalized Commercial Banks (NCBs), Specialized Banks
(SPBs), and Private Trans-National Banks (TNBs).

1.2 Origin of the report:

This report has been prepared as a pre-requisite of obtaining BBA degree under the
National University of Bangladesh. This report was done as a part of the requirement
for successful completion of the internship program. Exposure to the business world
and acquiring practical knowledge was the primary objective for this assignment. I
was attached with United Commercial Bank Ltd. for my internship. This topic of this
report is titled “Performance Analysis of Foreign Exchange Operations of United
Commercial Bank Limited.”

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1.3 Objectives of the study:
The objective of this program and the report can be divided into two types, such
as broad objectives and specific objectives.

1.3.1 Broad Objectives:

The main objective analysis financial performance of bank and foreign exchange
trade between import and export customers provide service by the bank and analysis
of bank risk content of international trade and exchange.

1.3.2 Specific Objectives:

The specific objective of the report is to analyze the delinquent customer‟s natures of
personal installment loan of UCBL, which will work as a supportive study to the
department of foreign exchange in the operations of foreign exchange. The detail
objectives of my study are as follows-

 To show banks overview and its products & services

 To analyze income statement and balance sheet estimate the EPS, ROA &
ROE Ratio
 To analyze this ratio for knowing its growth & position
 To analyze the result of this ratio for knowing banks performance better or
worse
 To analyze DuPont position for knowing overall return on equity
 To analyze the between import and export risk activates
 To know foreign exchange risk management policy- making and control
process adopted by the banks which use derivatives, in managing foreign
exchange exposure
 To identify the risk involved in foreign exchange proceedings
 To customer suffering financial loss as result of the default of another
customers sale contact
 The risks involved in repatriation of export proceedings
 To know the regulation and deregulation regarding Foreign Exchange in
Bangladesh
 To know the banks foreign exchange department service

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1.4 Scopes of the study:
The report has been prepared within the activities performed in the Foreign Exchange
Department and the necessary information of the organization related to the topic of
the report. Therefore, the scope of the report is limited-

 Overall description of the company

 Overview of personal asset products
 Customers who are involved in export and import
 Different foreign exchange policies and procedures
 To evaluate the performance of the united commercial Bank Limited import
and export business.
 To recommend about Foreign Exchange Business of the United Commercial
Bank Limited.

1.5 Methodology:
Generally most of the reports are prepared on the basis Quantitative or Qualitative
study. This report is totally prepared on the foundation qualitative study if the report
includes the following data collections process:

1.5.1 Primary Data:

For collecting primary data,
 Discussion with the respective bank‟s officers
 Sharing practical knowledge of officials
 Direct communication with the clients
 Exposure on different desk of the bank
 Field Study etc.

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1.5.2 Secondary Data:
The secondary sources were-

 Annual Report of UCBL & Website of UCB Limited

 Periodicals published by the Bangladesh Bank
 Relevant bank documents, papers, client/ customer and bank Journals
 Different corporate files
 Different Financial book

1.6 Limitations of the study:

To make a report various aspects and experiences are needed. But I have faced some
barriers for making a complete and perfect report. These barriers or limitations, which
hinder my work, are as follows:

 The website of UCBL does not contain updated information.

 To collect information I faced problem difficulty because of the excessive
nature of confidentiality mentioned by the officials of United Commercial
Bank Ltd.
 UCBL does not possess any Annual Report or Brochure
 Unavailability of sufficient written documents as required making a
comprehensive study
 All the concerned personnel‟s of the bank have not been interviewed.
 Financial performance is not shown in well-arranged within short time. A
 Lack of experience and knowledge of foreign exchange.
 Desk work is very complicated within short time.
 Inadequacy and lack of availability of required Current data.

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2.1 History of UCBL:
As financial intermediaries commercial banks play an important role in the financial
system and the economy. The importance of that in the development of the overall
economy of country cannot be described in short. From the inception of the
civilization the banking sector dominate the economic development of a country by
mobilizing the saving from the general people and channeling those saving for
investment and thus economic development and growth.
As a key component of the financial system, banks allocate funds from savers to
borrowers in an efficient manner. They provide specialized financial services, which
reduce the cost of obtaining information about both savings and borrowing
opportunities. These financial services help to make the overall economy more
efficient.
The importance of commercial banks after the ravage of the Liberation War to
develop a better economy was severely needed and it is needed now and will be
required in future also. Time to time Government of Bangladesh agreed to permit the
private commercial banking in the country.
To fulfill the demand as well as to improve the commercial banking service in our
country the United Commercial Bank Limited (Here in after UCBL) started its
operation in 1984 after obtaining license from Bangladesh Bank with a target to play
the vital role on the socio-economic development of the country. It was incorporated
on June 26, 1983 as a public limited company under the Companies Act, 1913. The
Bank obtained permission from Bangladesh Bank to commence business with effect
from June 28, 1983. The promoters of the Bank comprised of seventeen persons from
the private sector with long experience in business and industry.
The first branch opened by this bank is Motijheel branch 58, Motijheel C/A Dhaka. At
present UCBL have 148 branches except the head office.
The emergence of the UCBL is an important event in the country‟s financial sector at
the inception of financial sector reform. The authorized capital of UCBL is tk. 15000
million and paid up capital of the same bank is tk.8, 366.12 million. The Chairman
(Executive Committee) of the bank is M.A. Sabur and the Chairman (Audit
Committee) of the bank is Md. Jahangir Alam Khan. The bank has made a very good
progress due to its visionary management people as well as its appropriate policy and
implementation.

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2.2 UCBL at a Glance:

Name of the Company United Commercial Bank Ltd.

Legal Form A public limited company incorporated in Bangladesh

on 26th June 1983 under the companies Act 1994 and
listed in Dhaka Stock Exchange Limited on 30th
November 1986 and Chittagong Stock Exchange
Limited on 15th November 1995.
Commencement of 27th June, 1983
Business
Head Office Bulus Center
Plot - CWS- (A)-1
Road No - 34
Gulshan avenue, Dhaka-1212
Telephone No. +88-02-55668070
+88-09611999999

Fax No. +88-02-55668070-6000, +88-09611999911-5200

Website www.ucb.com.bd
www.ucbl.com
SWIFT UCBL BDDH

E-mail info@ucbl.com

Chairman Mr. M. A. Hashem

Managing Director Mr. Muhammed Ali

No. of Branches 148

No. of ATM Booth 101

No. of SME Centers 2

Off-Shore Banking Unit 1

No. of Employees 3,374

Authorized Capital TK. 15,000 million

Paid up Capital TK. 8,366 million

Face Value per Share TK. 10

Table: UCBL at a Glance

Source: www.ucb.com.bd

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2.3 Strategies of UCBL:
 Synchronized and steady growth of the bank.
 Utilize all available resources to develop various plans, policies and
procedures in each of the objective and goal areas.
 Implement plan policies and procedures
 Utilize a team of professional employees
 Search for a total customized solution of I.T for the purpose of full automation
step.

2.4 Goals of UCBL:

 Develop a realistic deposit mobilization plan.
 Develop appropriate lending risk assessment system.
 Develop capital plan.
 Develop a recruitment compensation, training and orientation plan.
 Developing a plan for offering better customer services.

2.5 Vision of UCBL:

To be the bank of 1st choice through maximizing value for our clients, shareholders
and employees and contributing to the national economy with the social
commitments.

2.6 Mission of UCBL:

 To maximize profit with steady growth ensuring major market share
 To be the leader in providing need based innovative products and services
 To continuously upgrade technology for strong information Management
System and meet customer expectations
 .To establish a strong best practice corporate culture of participative
management and enabling environment where innovativeness and
performance is rewarded
 To develop and retain in quality workforce through effective Human Resource
Management System maintaining high moral and ethical standards
 To maintain high moral and ethical standard and participative

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  To nurture an enabling environment where the innovativeness and
performance is rewarded
 To offer an array of products & services in the search for excellence and create
an impressive economic value.

2.7 Objectives of UCBL:

 To achieve steady growth rates in following areas like; Profit, Deposit,
Advance, Import, Export, Treasury earning, Increase Earnings per Share,
Increase Customer base, Increase Return on Asset, Increase Return on
Investment etc.
 To Introduce Online banking to be established in 60% of the branches by next
3 years
 To establish computerized MIS software to be made available in all branches
 To link reward and remuneration with performance by the end of 2011
 To strong marketing team to be established for new innovative products and
services for exploring strong client base
 To contribute to social service by setting up UCBL foundation
 To increase professional efficiency and technology literacy throughout the
organization by conducting intensive training to develop and retain a quality
work force
 To put in place an effective Human Resource Management system.
 To continuously improve internal control and compliance of the bank
 To improve the quality asset by continuously improving Credit Risk
Management
 To setup a centralized core banking solution in place

2.8 Functions of UCBL:

 To mobilize the idle resources of the country by accepting Deposits from the
general public.
 To give facilities to the clients and shareholders in a systemic way
 To give opportunity of the people to do job in UCBL.
 To give encourage to the people for saving.
 To increase investment.

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  To identify customer demand and fulfill their demand by supplying money.
 To improve economy by borrowing financial facility.
 To assist Capital Market

2.9 SWOT ANALYSIS OF UCBL:

SWOT analysis is a strategic planning method used to evaluate the strengths,

weaknesses, opportunities, and Threats involved in a business venture. In banking
sectors it is important to identify the internal and external factors that are favorable
and unfavorable to achieve its objectives. From the SWOT analysis we can figure out
ongoing scenario of the bank. So to have a better view of the present banking practice
of UCBL, the SOWT analysis of UCBL is given below:

 STRENGTH:
It is an internal factor. It deals with the organizations own strength. UCBL‟s strengths
are
Usage of faster pc bank software which is PC BANK 2000
Efficient administration
Corporation with each other
Fewer default loan
Membership with SWIFT

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 Good banker-customer relationship
Energetic as well as smart work force
Well-furnished and air-conditioned bank

 WEAKNESS:
Weakness is also an internal factor of SWOT analysis. UCBL‟s weaknesses are
Existing manual vouchers
Limited consumer credit scheme
Enhance of new private banks
Lack of training facility
Lack of promotional activities
Officers in the junior level are not highly qualified

 OPPORTUNITIES:

Opportunities are external factors which indicate the industry‟s advantages available
for the companies
Huge business area
Introducing different debit and credit card
Industry‟s positive growth
Introducing any branch banking through online
Flexible credit schemes
Reliably to local public

 THREATS:
Threats are external factors of SWOT analysis. The threats for UCBL are
Different classic services of foreign banks
Better developed card division of other private banks
Uses of modern technologies by the rival banks
Political unrest and government restricted banking strategies
The number of rivalry is too high into the banking industry

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2.10 Customer Services and Automation:
To err is human and forgiveness divines” a proverb, the bank believes but the
customers will not accept. Because for a service they pay for they want it 100% defect
free. So, improvement of the customer service should always be their motto. To
operate in the globalize environment, the banks future plan is to equip all the units of
the bank with modern technology, such as online service, ATM service etc. for the
service of the customer round the clock, UCB launched credit cards for their
customers from April 2006.

2.10.1 Products and Services of UCBL:

 UCB Multi-Millionaire
 UCB Money Maximizes
 UCB Earning plus
 UCB DPS plus
 Western Union Money transfer
 SMS Banking Services
 Online Service
 Credit Card
 One Stop service
 Time Deposit Scheme
 Monthly Savings Scheme
 Deposit Insurance Scheme
 Inward & Outward Remittances
 Travelers & Outward Remittances
 Travelers cheques
 Import finance
 Loan syndication
 Underwriting and Bridge Financing
 Industrial finance
 Trade finance
 Foreign Currency Deposit A/C
 RFCD ( Resident Foreign Currency Deposit Account)
 Consumer Credit Scheme

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2.10.2 Other Services:
 Custody and clearing:
UCBL plays an important role in custody and clearing in Bangladesh. The network
uses advanced securities clearing system, which was developed in-house and provides
round-the-clock online real-time access to client securities portfolios.

 Investment banking and markets:

This division brings together the advisory, financing, asset management, equity
securities, private banking, trustee, private equity and treasury and capital market
activities of the UCBL.

 NRB Services:
Bangladesh International is a unique service from UCBL that offers NRBs ( Non-
Resident Bangladeshi) a host of reliable products and services linked to the strength
of our global network.

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3.1 Definition of Foreign Exchange:
Foreign Exchange means exchange foreign currency between two countries. If we
consider “Foreign Exchange” as a subject, then it means all kind of transactions
related to foreign currency. In other wards foreign exchange deals with foreign
financial transactions.
H.E Evitt defined “Foreign Exchange” as the means and methods by which rights to
wealth expressed in the currency of one country are converted into right to wealth in
terms of the currency of another country.

3.2 Foreign Exchange Banking System in Bangladesh:

The term “Foreign Exchange” has three principal meanings. Firstly, it is term used
referring to the currencies if other countries in terms of any single one currency. To a
Bangladeshi, Dollar, Pound sterling etc are foreign currencies and such as foreign
exchange. Secondly, the term also commonly refer to some instruments used in
international trade such as bill of exchange, drafts, travel cheques and other means of
international remittance. Thirdly, the term foreign exchange is also quite often
referred to the balance in foreign currencies held by a country.
Foreign Exchange business comprises three areas: import, export and remittance. H.E
Evitt defined “Foreign Exchange” as the means and methods by which rights to
wealth expressed in terms of the currency of one country are converted into rights to
wealth in terms of the currency of another country. Foreign Exchange Department is
the International department of bank. It deals with globally and facilitates
international trade through its various modes of services. Its bridges between
importers and exporters. Bangladesh Bank issues license to scheduled banks to deal
with foreign exchange. These banks are known as Authorized Dealers.
If the branch is authorized dealer in foreign exchange market, it can remit foreign
exchange from local country to foreign country. This department mainly deals with
foreign currency. This is why this department is called foreign exchange department.
Foreign Exchange change Department of a bank is depending on local & International
trade.

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3.3 Regulatory Requirements of Foreign Exchange:
Any import and export of our country is regulated by different local and international
laws and regulatory bodies. The core guidelines under the preview of which import
and export of our country have to be performed are:
 Import Policy
 Export Policy
 Guidelines for foreign exchange transaction of Bangladesh Bank (Vol. 1 &
2)
 Circular issued by Bangladesh Bank
 Circular issued by NBR
 Circular issued by Chief Controller of Imports and Exports (CCI&E)
 Public Notice
 Ministry of Commerce Circular
 Other Authorization (i.e. NBC Dept.)

Among the regulatory bodies, Chief Controller of Import and Export, Bangladesh
Bank play major role in monitoring and ensuring compliance of various
regulations.

3.4 Why Exchange Is To Be Controlled:

Foreign Exchange is to be controlled for the following reasons:
 To stabilize the rate of exchange.
 To protect domestic Industries.
 For proper implementation of plans.
 To increases the bargaining strength.
 To check over invoicing & under invoicing.
 To check the black marketing and smuggling.
 For regulating the international movement of goods.

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3.5 Functions of Foreign Exchange:
The Bank acts as a media for the system of foreign exchange policy. For this reason,
the employee who is related of the bank to foreign exchange, especially foreign
exchange business should have knowledge of these following functions:
 Rate of exchange.
 How the rate of exchange works.
 Forward and spot rate.
 Methods of quoting exchange rate.
 Premium and discount.
 Risk of exchange rate.
 Exchange control.
 Convertibility.
 Exchange position.
 Intervention money.
 Foreign exchange transaction.
 Foreign exchange trading.
 Export and import letter of credit.
 Non-commercial letter of credit.
 Financing of foreign trade.
 Nature and function of foreign exchange market.
 Rules and regulations used in foreign trade
 Exchange arithmetic

3.6 Areas of Foreign Exchange:

Foreign exchange has three wings that are below
 Import
 Export
 Remittance

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3.6.1 Import:
Buying of goods and services from foreign countries for sales is considered as import.
The person or organization who imports the goods & services from foreign countries
is known as Importer and form which goods & services are imported is known as
Exporter. In case of import, the importers are asked by their exporters to open a Letter
of Credit (L/C). So that there payment against goods and services is ensured.
 Opening of Letter of Credit
 Advance Bill
 Bill for collection
 Import loan & Guarantees

3.6.2 Export:
The term export means shipping the good and services out of the port of a country.
The seller of such goods and services is referred to as an “exporter” who is based in
the country of export.
 Pre-shipment advance
 Purchase of foreign bills
 Negotiating of foreign bills
 Export guarantees
 Advising or confirming letters-letter of credit

3.6.3 Remittances:
Remittance is a transfer of money by a foreign worker to an individual in his or her
home country. Money sent home by migrants competes with international aid as some
of the largest financial inflows to developing countries.
 Issue of DD, MT, TT etc.
 Payment of DD, MT, TT etc.
 Issue and enhancement of traveler‟s cheques
 Sales and enhancement
 Of foreign currency notes
 Non-resident accounts

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3.7 Foreign Exchange markets:
UNITED COMMERCIAL BANK LIMITED serve as financial intermediaries in the
foreign exchange market currency convert by the selling and buying or import or
export currencies to accommodate customers. The speculate on foreign exchange
currency movement by taking long positions in some currencies and short positions in
others and provide forward contact to customers, options to customers. The banking
engages in foreign security transactions for their customers. The Exporters exchange
their customers based by allowing customers to pay in their local currency and the
importers have the upper hand when they take the responsibility to pay a foreign
suppliers in local currency and building hedging cost into pricing. Diversity your
international suppliers base reduces the risks associated with doing business with a
limited number of vendors, in a limited numbers of regions.

3.8 Foreign correspondents of UCBL:

United Commercial Bank Ltd has a wide range or link whole over the world for
the purpose of doing their foreign exchange business. The bank at present, total
number of correspondent is above 410, UCBL has some tremendous agreement with
some world most important country like-
1. U.S.A
2. Canada
3. India
4. Japan
5. Brazil
6. Australia
7. United Kingdom
8. U.A.E
9. China
10. Malaysia
11. Austria
12. Germany
Some world recognized bank also support UCBL for doing their daily operational
activities with some world reputed banks-

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 1. HSBC
2. Citibank, N.A
3. Standard Chartered Bank
4. Hanvit Bank Ltd
5. American Express Bank
6. National Bank of Pakistan
7. Bank of India
8. Islami Bank of Bahrain
9. Muslim Commercial Bank

The foreign correspondents of the bank play an important role maintaining the
currency collection of the bank and they also give a huge contribution on the
remittance of our country also.

3.9 Foreign Exchange Business Mechanism:

Foreign exchange business comprises three areas: export, import and remittance. In
order to start a business with the bank involving foreign exchange, a prospective
client has to fulfill the following requirements:
When a company wants to go for any export or import through a bank, he has to fulfill
some common criteria. Let us first consider the issue of import. For importing goods
through a bank, the importer has to meet the following criteria:
 He has to be a customer of the bank; he has to have a CD account with the
bank.
 In case of import, he must have an IRC (Import Registration Certificates).
 He has to have experienced of importing the same goods through the bank.
If he has so such experience, the goods that he wants to import have to be
approves by the importer policy.
 The item of import has to have marketability.
 He has to fix a right for the goods to be imported.
If these requirements are fulfilled by the customer, the banker may proceed to prepare
the proposal for the customer. If the broad approves the proposal, the authorized
banker can open L/C in favor of the customer has to fulfill the following
requirements:

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  The exporter has to be a customer of the bank; that means; he has to have a
CD account with the bank.
 The exporter has to give an Export L/C or contact against which can open
L/C.

3.10 Import Section:

The import section helps and other people to import goods. In international
environment, buyer and seller are, in most of the cases, unknown to each other. So, a
seller always seek guarantee for the payment for his exported goods. It is the bank that
guarantees the seller of payment for the goods on behalf of the buyer.
The guarantee is called letter of credit. Thus the contract between the importer and the
exporter is given a legal shape by the banker by its “Letter of Credit”.

3.10.1 Import Business of UCBL:

United Commercial Bank Ltd has embarked on extensive foreign exchange with a
view to facilitating international trade transactions of the country. The bank has
established 8761 L/C for import worth 58.857 million during the year 2009.

The main objectives of the Import policy:

To make import policy compatible with the changes in the world market that
have occurred as a result of the introduction of market economy and signing
the GATT agreement
To simplify the procedures for import of capital machinery and industrial raw
materials with a view to promoting exports, and
To ensure growth of the indigenous industry and availability of high quality
goods to the consumers at a reasonable price.

3.10.2 Different ways of Import:

Basically there are 8 ways involved in import. These are given below:

 Import License not required: No import license will be necessary for

import primarily against cash foreign exchange.
 Import against LCA Form: Unless otherwise specified, all imports
transacted through a bank (L/Cs, bank drafts, remittance etc.) shall require
LCA forms irrespective of the source of finance.
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 Import against L/C: Unless otherwise specified, import shall be made only
by opening irrevocable letter of credit (L/C)
 Import against LCA from but without opening of letter of credit (L/C):
Import against LCA from may be allowed without opening of letter of credit
in the following cases:
Import of books, journals, magazines and periodicals on sight
draft issuance bill basis;
Import of any permissible item for an amount not exceeding US
dollars five thousand only during each financial year against
remittance made from Bangladesh. However, consignment from
Myanmar shall be importable.
Import under commodity aid, grant or such other loan for which
there are specific procurement procedures for import of goods
without opening any L/C;
Import of “International Chemical References” through bank
drafts by recognized pharmaceuticals (allopathic) industry on the
approval of Director, Drugs Administrators for the purpose of
quality control of their products.

 Imports against Import and in special cases against clearance permit

(for clearance of goods on payment of fine): In the following cases,
neither LCA From nor opening of L/C will be necessary; but Import
Permit (IP) or Clearance Permit (CP) will have to be obtained by the
importer for

Import of books, magazines, journals, periodicals and scientific and

laboratory equipment against surrender of UNESCO coupons;
Importer under Pay-As-Earn-Scheme in the following cases on the
basis of clearance of the Bangladesh Bank:

- Import of plant and machinery for export oriented industrial

units with the clearance of the competent sanctioning
authority, wherever necessary; and
- Trawlers and other fishing vessels, either new or not
exceeding twenty years old.
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  Import on Deferred Payment Basis or against Supplier’s Credit:
Subject to restriction and prohibitions contained in this order, import on
deferred payment basis against suppliers. Credit may be allowed on the
basis of procedure laid down by the Bangladesh Bank in the behalf.
 Import against direct payment abroad: Only Bangladeshi national
living abroad may send any importable item irrespective of value
ceiling against direct payment abroad in the name of any Bangladeshi
living in Bangladesh. The name and address of the consignee shall be
mentioned in the import documents. For such import, no permission or
import permit from the Import Control Authority shall be necessary.
 Time limit for opening of L/C: Unless otherwise specified, for import
under cash foreign exchange, letter of credit shall be opened by all
importers within one hundred and fifty days from the date of its issue or
from the date of its registration. The above time limit may be extended
up to such time as deemed fit by the Chief Controller. For import under
foreign aid/grant and barter/STA, L/C shall be opened within the limit
as may be notified by the Chief controller.

3.10.3 Legislations for Import:

Importers are foreign goods and services purchased by consumers, firms &
government agencies in Bangladesh. To import, a person should be competent to be
an „importer‟. According to Import and Export Control Act, 1950, the office of the
Chief controller of Imports and Exports (CCI & E) provides the registration (IRC) to
the importer. Import of goods in Bangladesh is regulated by
Ministry of commerce in terms of the Import and Export Control
Act, 1950;
Import Policy order and the Public Notice issued by the officer of
the Chief controller of Imports and Exports (CCI & E)
At present, it is regulated by the Importer Policy Order (1997-
2002), which came into effect on June 14, 1998. The duration of
the Import Policy Order was extended up to June 2003 by an
amendment. This policy directs certain import procedures and
administers the whole activity.

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3.10.4 Facilities Provide By Import Section:
Import section of UCBL takes different policies to facilitate import procedures. The
facilities provided by import section are given below:
 Opening of Letter of Credit
 Facilitating payments to the exporter on behalf of the importer
 Providing funded and non-funded credit facility
 Issuing bank currency on behalf of the foreign companies

3.10.5 Import Mechanism:

Letter of credit can be opened with any of the branch authorized to deal in foreign
exchange. Bank issuing L/C has to perform the following functions that are to be done
in the different stages:
 Applicants for letter of credit limit:
The applicant of letter of credit must be known as customer to the bank.
He has to approach the bank to open a letter of credit for import of goods through an
application in the letterhead pad.
 Application for letter of credit limit:
Before opening letter of credit, importer applies for letter of credit limit.
To have an import letter of credit limit, an importer submits an application to the
import division of the United Commercial Bank furnishing information-
Particulars of account maintained with the bank
Nature of business
Required amount of limit
Payment terms and collections
Goods to be imported
Security offered
Repayment schedule
A credit officer scrutinizes the application and accordingly prepares a credit limit
proposal (CLP) and forwards it to the Head Office Credit Committee (HOCC). The
committee, if satisfied, sanctions the limit and returns it to the branch. Thus the
importer is entitled to an approved credit limit. Once a party succeeds in opening an
L/C through UCBL, generally it requires no fresh credit limit on subsequent

Page-22
occasions; however, further approval of the Head Office is required only if it proposes
to increase its credit limit.
 Taking necessary documents from the applicant:
A bank takes the following documents with the application from the
applicant while opening a letter of credit:
Application for letter of credit duty signed by the importer.
Letter of credit Authorization Form (L/CAF).
Importer Permit Form (IMP).
Valid Import Registration Certificate (IRC).
Indent or Pro-forma Invoice.
Valid Membership Certificate.
Documents evidencing payment of fee for current year for Import
Registration Certificate (IRC)
Declaration by the importer that he has paid income tax and
submitted returns to the income tax authority for the last three
years.
Insurance Cover Note and Stamped Tax Insurance Policy.

Note: For import of capital machinery and initial spares to set up a new industry, a
letter of credit can be opened without Import Registration Certificate (IRC). No
waiver from the Chief Controller of Imports and Exports is necessary for this purpose.

 Lodgment:
The documentary letter of credit (L/C) constitutes of the important methods
of financing trade. Because of the phenomenal growth in world trade and commodity
wise diversification of trade its importance has significantly increased. On receipt of
the documents from the negotiating bank, the L/C opening bank will make entry the
particulars of the documents into Inward Foreign Bill Register and prepare the
voucher by converting the foreign currency into Bangladesh Taka. This stage is
known as lodgment of import bills.
The full of documents which are submitted by the exporter to his bank as per terms
and conditions of the L/C are known as shipping documents. The L/C opening bank
may receive these shipping documents from his foreign correspondent (Bank) in two
ways:
Page-23
 Documents on collection basis: The shipping documents which are
not negotiable by the exporter‟s bank due to some discrepancies
will be sent to L/C opening bank on collection basis. The collection
bank (exporter‟s bank) will mention the discrepancies their
forwarding schedule.
Negotiated Documents: The documents which have already been
negotiated i.e. the exporter‟s bank (this bank is known as
negotiating bank) has made payment to the exporter against the
document submitted by him may be termed as negotiated
documents. Generally, these documents are free from
discrepancies. Though these documents are supposed to be free
from any discrepancy in the documents.

3.10.6 Import Business of UCBL:

United Commercial Bank Limited has embarked on extensive foreign exchange with
a view to facilitating international trade transactions of the country. The bank has
established 8761 L/C for import worth 72.857 million during the year 2013.

Year Import (Amount in million TK)

2009 58,857.00

2010 86,666.50

2011 90,919.00

2012 94,843.00

2013 117,542.90

Table: Import Business of UCBL

Chart: Annual Report of Recent Years

Page-24
3.10.7 Graphical Presentation of Last 5 Years Import Business of
UCBL:

Import Business of UCBL

140,000.00

120,000.00
117,542.90
100,000.00
94,843.80
90,919.70
80,000.00 86,666.50

60,000.00
58,857.00

40,000.00

20,000.00

0.00
2009 2010 2011 2012 2013

Table: Export Business of UCBL

Source: Annual Report of Recent Years

3.11 Introduction to Export:

The goods and services sold by Bangladesh to foreign households, businessman and
Government are called Export. The export trade of the country is regulated by the
Imports and Exports Control Act, 1950. There are number of formalities which an
exporter has to fulfill before and after shipment of goods. The exports from
Bangladesh are subject to export trade control exercised by the Ministry of Commerce
through Chief Controller of Imports and exports (CCI & E). No exporter is allowed to
export any commodity permissible for export from Bangladesh unless he is registered
with CCI & E and holds valid Export Registration Certificate (ERC). The ERC is
required to be renewed every year. The ERC number is to be incorporated on EXP
forms and other documents connected with exports.

Page-25
3.11.1 Export Section of UCBL:
Bangladesh exports a large quantity of goods and services to foreign households.
Creation of wealth in any country depends on the expansion of production in the
export sector in international trade. Most of the exporters who export through United
Commercial Bank are readymade garment exporters. They open export letters of
credit here to export their goods which they open against the import letter of credit
opened by their foreign importers.

3.11.2 Export Policy:

Export policies formulated by the Ministry of Commerce, GOB provide the overall
guideline and incentive for promotion of exports in Bangladesh. Export policies also
set out commodity-wise annual target. It has been decided to formulate these policies
to cover a five year period to make then contemporaneous with the five year plans and
to provide the policy regime. The export oriented private sectors, through their
representative bodies and chambers, are consulted in the formulation of export
policies and are also represented in various export promotion bodies set up by the
government. However, Exports from Bangladesh are regulated by the following Acts,
Guidelines and Authorities:
 Bangladesh Bank by issuing guidelines and circulars in compliance with
Foreign Exchange Regulation Act-1974 under the authority given to it by
the aforesaid Act. It controls physical and payment aspect of exports.
 Ministry of Commerce by issuing Export Policy Order under the authority
given to it by Export-Import Act, 1950. It outlines the Governments export
development strategies and lays down the package of the incentives to
promote exports. It also provides the list of items, which are either banned
for export or export is subject to fulfillment of certain conditions.

3.11.3 Export Procedures:

 Registration of Exporters
 Securing Export Order
 Signing the Contract
 Receiving the Letter of Credit
 EXP form for the declaration of exports

Page-26
  Shipment of goods
 Preparation or procurement of Export Documents
 Submission of Export Documents for Negotiation

3.11.4 Practice of Export Department in united Commercial Bank

Limited:
Bangladesh exports a large quantity of good and services to foreign households.
Readymade textile garments (both knitted and woven), jute, jute-made products,
frozen shrimps, tea are the main goods that Bangladeshi exporters export to foreign
countries. Garments sector is the largest sector that exports the lion share of the
country‟s export. Bangladesh exports most of its readymade garments products to
U.S.A and European Community (EC) countries. Bangladesh exports about 40% of its
readymade garments products to U.S.A. Most of the exporters who export through
U.C.B.L are readymade garment exporters. They open export L/Cs here to export
their goods which they open against the import L/Cs opened by their foreign
importers. Export L/C operation is just reverse of the import L/C operation. For
exporting goods by the local exporter, bank may act-
 As an advising bank: It receives documents from the foreign importer
and hands it over to the exporter. Sometimes it adds confirmation on the
L/C on request from the Operating Bank. By adding confirmation, it
assumes the responsibility to make payment to the exporter
 As negotiating bank: It negotiates the bill and other shipping documents
in favor of the exporter. That is, it collects the proceeds of the export-bill
from the drawer and credits the exporter‟s account for the same. Collection
proceed from the export bill is deposited in the bank‟s NOSTRO account
in the importer‟s country. Sometimes the bank purchases the bills at
discount and waits till maturity of the bill. When the bill matures, bank
presents it to the drawer to in cash it. In our country, Export and Import
operation of bank is very much related with one another because of use of
Back to Back and maturity of payment for Back to Back L/C is set in such
that it can be paid out of export proceeds.

Page-27
3.11.5 Back To Back L/C:
It is simply issued to the clients against an import L/C. Back to Back mechanism
involves two separate L/C. One is Master Export L/C and another is Back to Back
L/C. On the strength of Master Export L/C bank issues Back to Back L/C. Back to
Back L/C is commonly known as Buying L/C. On the contrary, Master Export L/C is
known as Selling L/C.

3.11.6 Documents required for opening a Back to Back L/C:

In U.C.B.L Foreign Trade Branch, the following papers or documents be used for
opening a Back to Back L/C-
 Master L/C
 Valid Import Registration Certificate (IRC) and Export Registration
Certificate (ERC)
 L/C Application and KCAF duly filled and signed
 Proforma Invoice or Indent
 Insurance Cover Note with money receipt

3.11.7 Payment of Back to Back L/C:

In case of Back to Back L/C as 60-90-120-180 days of maturity period, deferred
payment is made. Payment is given after realizing export proceeds from the L/C
issuing bank.

3.11.8 Negotiation of Export Documents:

The most common method of financing exporter is negotiation of documents under
L/C. It is a post-shipment credit. Here the bank acts as a negotiating bank. After the
shipment of the goods, the exporter submits the relative documents to the branch for
negotiation. After approval of negotiation of the bill the full particulars of the
documents are branch with a forwarding letter. The branch claim reimbursement from
the issuing bank or from the reimbursing bank, giving clear instructions to credit
proceeds of the bill to the U.C.B.L head office NOSTRO A/C maintained with the
named correspondent bank abroad under telex intimation to the principal branch and
head office.

Page-28
Negotiation stands for payment of value to the exporter against the documents
stipulated in the L/C. If documents are in order, U.C.B.L purchases (negotiates the
same on the basis of banker-customer relationship. This is known as Foreign
Documentary Bill Purchase (FDBP).
If the bank is not satisfied with the documents submitted to U.C.B.L gives the
exporter reasonable time to remove the discrepancies or sends the documents to L/C
opening bank for collection. This is known as Foreign Documentary Bill for
Collection (FDBC) entered into the Foreign Bill purchased (FBP) register. The
documents are sent to the L/C opening.

3.11.9 Presentation of Export Documents for Negotiation or

Purchase:
After shipment, exporter submits the following documents for negotiation:
 Bill of Exchange
 Bill of Lading
 Insurance Policy
 Certificate of Origin
 Inspection Certificate
 Consular Invoice
 Packing List

3.10.10 Foreign Documentary Bill for Collection (FDBC):

U.C.B.L forwards the document for collection due to the following reasons:
 If the documents have discrepancies
 If the exporter is a new client

3.11.11 Mode of Payment of Export Bill under L/C:

As per UCPDC 500, 1993 revision there are four types of credit. These are as follows:

 At Sight Payment Credit: In a sight payment credit, the bank pays the
stipulated sum immediately against the exporter‟s presentation of the
documents.
 Deferred Payment Credit: In deferred payment, the bank agrees to pay
on a specified future date or event, after presentation of the export
Page-29
 documents. No bill of exchange is involved. Payment is given to the party
at the rate of D.A 60-90-120-180 as the case may be. But the head officer
is paid it T.T clean rate. The difference between the two rates in the
exchange trading for the branch.

 Negotiation Credit: In negotiation credit, the exporter has to present a bill

of exchange payable to him in addition to other documents that the bank
negotiates.
 Acceptance Credit: In acceptance credit, the exporter presents a bill of
exchange payable to him and drawn at the agreed tenor (that is, on a
specified future date or event) on the bank that is to accept it. The bank
signs its acceptance on the bill and returns it to the exporter. The exporter
can represent it for payment on maturity. Alternatively he can discount it
in order to obtain immediate payment.

3.11.12 Export Business of UCBL:

United Commercial Bank Limited has embarked on extensive foreign exchange with
a view to facilitating international trade transactions of the country. The bank has
established 9724 L/C for export worth 78.539 million during the year 2013.

Year Export (Amount in million TK)

2009 38,519.00

2010 50,712.00

2011 76,962.00

2012 78,309.10

2013 94,288.50

Table: Export Business of UCBL

Source: Annual Report of Recent Years

Page-30
From this table we can understand that in year 2009 export of bank is lower than from
year 2010 for economic inflation, but in years 2011 to 2012 export business of the
UCBL is increase rapidly $ continuously for strong economic framework of the
world.

3.11.13 Graphical Presentation of Last 5 Years Export Business of

UCBL:

Chart: Export Business of UCBL

Source: Annual Report of Recent Years

Interpretation
The last 5 years export business of UCBL is shown on the graph where we can see
that in year 2009 the export is less than 2010. But in year 2011 & 2012 export is
rapidly increase because of strong economic welfare, where economic depression &
economic inflation is reduces and that reason export business of UCBL is increase
from TK 76,963.80 to 78,309.10 million, which is shown the strong position of the
bank, so we can said that the overall export business sector of the UCBL increased
rapidly.

Page-31
3.12 Foreign Remittance
This bank is authorized to deal in foreign exchange business. As an authorized dealer,
a bank must provide some services to the clients regarding foreign exchange and this
department provides these services. The basic function of this department are outward
and inward remittance if foreign exchange from one country to another country. In the
process of providing this remittance service, it sells and buys foreign currency. The
conversion of one currency into another takes place an agreed rate of exchange, which
the banker quotes, one for buying and another for selling. In such transactions the
foreign currencies are like any other commodities offered for sale and purchase, the
cost (convention value) being paid by the buyer in home currency, the legal tender.

3.12.1 Foreign Remittance of UCBL

Our economy depends highly on foreign remittance. The people who are working
aboard send currency through the help of the bank. United Commercial Bank Ltd
follows three ways to collect foreign remittance. The transaction of the authorized
dealer in foreign exchange involves either outward or inward remittance of foreign
exchange from one country to another. A customer is permitted to endorse maximum
$1000 for SAARC countries. If SAARC countries are to be visited by road then per
year $500 can be endorsed per passport. At cash can not be endorsed over $500.
Foreign remittance increased our countries overall GDP without foreign remittance
development of Bangladesh, economy of Bangladesh is must be hampered, in this
case of UCBL bank has a great impact on overall GDP of the country. Economy of
Bangladesh is must be depend on foreign remittance.

3.12.2 Remittance Procedures of Foreign Currency:

There are two types of remittance:
 Inward Remittance: Inward remittance covers purchase of foreign
currency in the form of Foreign T.T, D.D and bills, T.C etc. sent from
abroad favoring a beneficiary in Bangladesh. Purchase of exchange is to be
reported to Exchange Control Department of Bangladesh Bank.
 Outward Remittance: Outward remittance covers sales of foreign
currency through issuing foreign T.T, Drafts, Travelers Check etc. as well
as sell of foreign exchange under L/C and against import bills retired.

Page-32
3.12.3 Works of Remittance’s Department:
 Issuance of TC, cash dollar /pound
 Issuance of FDD, FTT & purchasing, payment of the same
 Passport endorsement
 Encashment Certificate
 F/C account opening & filling
 Opening of export FC retention quota A/C & maintain
 Maintenance of ledger of cash dollar, FC deposit A/C & T/C
 Maintain FBC register & follow up FBC
 Opening of student file & maintain
 Preparation of all related statement, voucher & posting
 Preparation of weekly, monthly, yearly statement for Bangladesh Bank
returns timely

3.12.4 Modes of Remittance process:

The remittance process involves the following four models:

Sell Bank sells dollar or pound for using in abroad by the

purchaser. The maximum amount of such sell is mentioned
in the Bangladesh bank publication of „Convertibility of
Taka for Currency Transactions in Bangladesh‟.
Cash
Remittance Bank can purchase dollar from resident and non-resident
Dollar In Bangladeshi and Foreigner. Most dollars comes from
Purchase
realization of Export Bill of Exchange.
Issue of TC is useful to traveler abroad. Customer can in cash the TC
TC in abroad from the drawee bank. TC is alternative to holding
cash and it provides better security than holding cash in
Travelers hand.
Cheque (TC)
Buying of If any unused leaf of TC is surrendered, bank buys it from
TC the customer. All payments are made in local currency.
Banks generally buy only those TC.
Outward It remits fund by tested TT via its foreign correspondence
Page-33
 TT bank in which it is maintaining its NOSTRO account.

Telex Transfer
Incoming It also makes payment according to telegraphic message of
TT its foreign correspondence bank from the corresponding
VOSTRO account
Bank issue Demand Draft in favor of purchaser or any other according to
Foreign instruction of purchaser. The payee can collect it for the drawee bank in
which the issuing bank of demand draft holds it NOSTRO account. Bank
Demand Draft
also makes payment on DD drawn on this bank by its foreign
correspondence bank through the VOSTRO account

3.12.5 Remittance of UCBL:

Remittance (Amount in million TK)

Year

2009 4914.00

2010 5452.00

2011 16802.00

2012 14838.00

2013 10788.07

Table: Remittance Business of UCBL

Source: Annual Report of Recent Years

Page-34
3.12.6 Graphical Presentation of Last 5 Years Remittance Business of
UCBL:

Remittance Business of UCBL

18,000.00

16,000.00 16,802.80

14,000.00 14,848.30

12,000.00

10,000.00 10,788.07

8,000.00

6,000.00
5,452.10
4,000.00 4,914.00

2,000.00

0.00
2009 2010 2011 2012 2013

Chart: Remittance Business of UCBL

Source: Annual Report of Recent Years

Interpretation
This remittance graph is drawn from the remittance table where remittance table
shown the last 5 years remittance income of the bank, from the graph we can see that
year 2013 remittance business of UCBL is decrease from in year 2012 for economic
inflation. But bank was gradually increased their remittance in 2009 to 2012 and that
time remittance increased 4,914.00 to 10,788.07 million.

Page-35
3.13 Total Foreign Exchange Business of UCBL:
The performance of foreign exchange business of UCBL can be visualized from the
following data in table. Here, five years data of foreign exchange business are
presented. These are off balance sheet items and showed as contingent liability.

Year Export L/C Import L/C Remittance Total Business

2009 58,857.00 38,519.00 4,914.00 67,630.00

2010 86,666.00 50,712.10 5,452.10 142,830.70

2011 90,919.00 76,962.80 16,802.80 184,685.00

2012 94,843.00 78,309.10 14,848.30 188,001.00

2013 117,542.90 94,288.50 10,788.07 222,619.00

Table: Total Foreign Exchange Business of UCBL

Source: Annual Report of Recent Years

Interpretation
In year 2009, the summations of export, import, remittance business of UCBL is
67,630.00. In year 2010, the summation of export, import, remittance business of
UCBL is 142,830.70, where as in year 2011, 2012, 2013 the summation of export,
import and remittance business of UCBL is respectively184,685.30 million,
188,001.00 million and 222,619.47 million Tk. From this table we can see that foreign
exchange business of UCBL is gradually increased in every year.

Page-36
3.14 Analysis of Balance Sheet:
3.14.1 Property, plant and equipment:
The company has the following property & assets; property, plant and equipment,
capital work in progress, investment in subsidiaries, other investment, trade and other
receivables, advances, deposits and prepayments, cash and cash equivalents and other
assets.
Total Assets

Particulars 2009 2010 2011 2012 2013

Assets 90,483.32 129,877.03 168,891.78 207,448.38 226,333.13

Table: Total Assets

Source: Annual report 2012-2013

Total Assets of last 5 Years

250,000.00

226,333.13
200,000.00
207,448.38

150,000.00 168,891.78

129,877.03
100,000.00
90,483.78
50,000.00

0.00
2009 2010 2011 2012 2013

Chart: Total Assets of last 5 years

From the above graph we can see that the total assets TK 129,877.03 (13.63%) in
2010 is greater than the previous year 2009. Total assets TK 168,891.78 (20.52%) in
2011 is greater than the previous year 2010. Total assets TK 207,448.38 (25.20%) is
greater than the previous year 2011. Total assets TK 226, 333.132 (27.50%) in 2013 is
greater than the previous year.
Page-37
 Total Liabilities

Particulars 2009 2010 2011 2012 2013

Liabilities 84,778.32 122,059.76 152,925.36 189,277.37 205,828.17

Table: Total Liabilities of last 5 years

Source: Annual Report of Recent Years

Total Liabilities of last 5 Years

250,000.00

200,000.00
205,828.17
189,277.37

150,000.00
152,925.36

122,059.76
100,000.00

84,778.32

50,000.00

0.00
2009 2010 2011 2012 2013

Chart: Total Liabilities of last 5 years

Through this graph, we can see that total liabilities TK 122, 0579.76 (16.17%) in 2010
is more than the previous year 2009. The total liability TK 152,925.36 (20.26%) in
2011 is more than the previous year 2010. The total liability TK 189,277.37 (25.07%)
in 2012 is more than the previous year 2011. The total liability TK 205,828.17
(27.27%) in 2013 is more than the previous year 2012.
Page-38
3.14.2 Shareholder’s Equity:
The sources of shareholders equity are as follows: paid up capital, share premium,
statutory reserve, general reserve, other reserve and retained earnings. The
shareholder‟s equity of last 2 years are given below:

Shareholder’s Equity

Shareholder‟s 2012 2013 Growth

Equity

Paid up Capital 8,366.12 8,366.12 0.00

Share Premium 1,454.98 1,454.98 0.00

Statutory Reserve 5,519.55 4,342.09 27.12

General Reserve 26.58 26.58 0.01

Other Reserve 3,234.99 3,129.84 3.36

Retained Earnings 1,902.75 851.41 123.48

Total 20,504.97 18,171.02 12.84

Table: Shareholder’s Equity

Source: Annual report 2012-2013

Page-39
 Shareholder's Equity

8.01%
17.22%
Share Premium
0.15% Paid up Capital
Retained Earnings
Statutory Reserve
26.92% 46.04%
General Reserve
Other Resrve
4.69%

Chart: Shareholder’s Equity

Through this table, we can see that the total shareholder‟s equity is TK 20,504.97 in
2013 is greater than the previous year 2012 which was 18,171.02.

3.14.3 Deposits:
During the year 2013 the total deposits of the bank increased by BDT 14,366.31
million and stood at BDT 184,896.85 million which was BDT 170,530.54 million in
2012 representing growth of 8.42% over the year 2012. There are as many 34 deposit
products in UCBL. The clientele group of the bank includes individual, corporation,
NGO, NBFI, government bodies etc.

Page-40
 Deposits

Deposits and 2013 2012 Growth Mix (%)

other (%) 2013 2013
accounts
Current 11, 180.28 8,798.85 27.07 6.05 5.16
Deposits

Saving Bank 19,094.89 16,224.24 17.51 10.31 9.51

Deposits

Short Notice 17,880.41 16,193.56 10.42 9.67 9.50

Deposits

Fixed 105,157.25 106,408.31 (1.18) 56.87 62.40

Deposits

Scheme 18,287.83 10,803.31 69.28 9.89 6.33

Deposits

Bills Payable 2,461.86 2,562.36 3.92 1.33 1.50

Other 10,864.32 9,540.12 13.88 5.88 5.59

Deposits

Total 184,896.85 170,530.54 8.42 100.00 100.00

Table: Deposits of UCBL of Recent Years

Source: Annual report 2012-2013

Page-41
 Curve: Deposit Mix 2013
Source: Annual report 2013

Curve: Deposit Mix 2013

Source: Annual report 2012

Page-42
3.15 Last Two Years Profit and Loss Account of UCBL:

Profit & Loss Jan-Sep Jan-Sep Jan-Jul Jan-Jul Jan-Mar Jan-Mar

Account 2013 2012 2013 2012 2013 2012

3rd qrt- 3rd qrt- 2rd qrt- 2rd qrt- 1st qrt- 1st qrt-
2013 2012 2013 2012 2013 2012
Net Interest 4,991.12 4,778.26 3,166.46 3,238.12 1,547.95 1,630.73
Income

Non-Interest 3,834.87 2,185.49 2,682.05 1,234.78 1,162.36 283.69

Income
Operating 4,072.23 3,222.95 2,943.97 2,148.75 1,125.06 893.13
Expense

Operating 4,753.76 3,740.80 2,904.53 2,324.14 1,585.25 1,021.29

Profit
Net Profit 1,527.56 724.31 1,058.69 629.56 (999.76) 412.87
After
Taxation
Earnings Per 1.83 0.87 1.27 0.75 (1.20) 0.49
Share (EPS)

Table: Recent Years Profit and Loss Account of UCBL

Source: Annual report 2012 & 2013

Through this table, we can see that the net profit of the bank is TK. 724.31in January
to September of 2012. The net profit of the bank is TK. 1,527.56 in January to
September of 2013 greater than the previous year in 2012. The earnings per share is
also increased from 0.87 to 1.83 in 2013. The net profit of the bank in January to
March of 2013 in (999.76) which is shown as loss account and earnings per share is
also shown negative figure which is (1.20)

Page-43
3.16 Last 5 Years balance Sheet Review:

Particular 2013 2012 2011 2010 2009

Authorized 15,000.00 15,000.00 8,000.00 8,000.00 1000.00

Capital

Paid up 8,366.12 8,366.12 7,274.88 2,909.95 1,1193.83

Capital

Shareholder‟s 20,504.97 18,171.02 15,966.41 7,817.27 5,705.47

Equity

Deposits 184,896.85 170,530.54 139,484.75 113,070.78 77,730.40

Loans and 148,664.86 136,071.65 115,506.33 93,560.70 61,692.22

Advances

Investments 35,587.25 26,090.32 19,383.42 15,048.23 9,346.39

Fixed Assets 7,957.31 5,222.78 3,288.09 1,966.35 1,305.81

Off-balance 67,094.06 52,153.26 40,255.78 40,797.74 22,098.19

Sheet
Exposure
Total Assets 226,333.13 207,448.38 168,891.78 129,877.03 90,483.78

Total 205,828.17 189,277.37 152,925.36 122,059.76 84,778.32

Liabilities

Figure: Recent Years balance Sheet Review

Source: Annual report 2012 & 2013

Page-44
3.17 Ratio Analysis of UCBL:

3.17.1 Return on assets:

The return on assets indicates the overall measure of profitability is return on assets.

Return on assets =

2011 2012 2013

Net Income Average Net Income Average Net Income Average

Total Total Total Assets
Assets Assets

764745570 5748772441 932897890 50639323161 2181636425 1101800312

Return on Assets: 16.67% Return on Assets: 21.44% Return on Assets: 19.80%

Table: Return on Assets

Source: Annual Report 2011 to 2013

Page-45
 Chart: Return on Assets

Comments:
Return on assets ratio of UCBL in 2011 is 16.67%. However, it has increased in the
year 2012 that is 21.44% but slightly reduced to 19.80% in the year 2013. So, we
think the return on assets of this company is maintaining a good standard.

Page-46
3.17.2 Current Ratio:
The current ratio is a widely used measure for evaluating company‟s liquidities &
short term debt-paying liability.

Current Ratio=

2011 2012 2013

Current Current Current Current Current Current

Assets Liabilities Assets Liabilities Assets Liabilities

12130131758 5453111732 80851643669 77785401051 12027461728 11307078250

Current Ratio: 2.2 Current Ratio: 1.04 Current Ratio: 1.06

Table: Current Ratio

Source: Annual Report 2011 to 2013

Page-47
 Current Ratio of last 3 years
2.5

1.5

2.2
1

0.5 1.04 1.06

0
2011 2012 2013

Chart: Current Ratio of Last 3 Years

Comments:
The current ratio of UCBL in 2011 is 2.2 times and in 2012 is 1.04 times which shows
a deceasing trend towards the year. So, liquidity and short-term debt paying ability is
not better. But in 2013, current ratio is increasing to 1.06 times which shows an
increasing trend toward the year. So, liquidity and short-term debt paying ability is
better than the previous year.

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3.17.3 Account Receivable Turnover:
Account receivable turnover measures the liquidity of receivables.

Account Receivable Turnover=

2011 2012 2013

Net Interest Average Net Net Interest Average Net Net Interest Average Net
Income Receivable Income Receivable Income Receivable

2008527966 2426602635 2617086773 161703437 3835413988 240949234

Account Receivable Account Receivable Account Receivable

Turnover= 8.28 Turnover= 16.18 Turnover= 15.91

Table: Account Receivable Turnover

Source: Annual Report 2012 to 2013

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 Account Receivable Turnover
18

16

14

12

10

8 16.18 15.91

4 8.28

0
2011 2012 2013

Chart: Account Receivable Turnover

Comments:
Account receivables turnover ratio of UCBL in 2011 is 8.28 times, but slightly
increased to 16.18 times in 2012 but it has reduced to 15.91 in 2013.

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3.17.4 Account Receivable Turnover in Days (DSO):
Account receivables turnover in days (DSO) is used to evaluate the firm‟s ability to
collect its credit sale in a timely manner.

DSO=

2011 2012 2013

Days in the Account Days in the Account Days in the Account

Year Receivable Year Receivable Year Receivable
Turnover Turnover Turnover

360 8.28 360 16.18 360 15.91

Account Receivable Account Receivable Account Receivable

Turnover in Days= 44 Turnover in Days= 22 Turnover in Days= 23

Table: Account Receivable Turnover in Days (DSO)

Source: Annual Report 2011 to 2013

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 Account Receivable Turnover in Days (DSO)
50

45
44
40

35

30

25

23
20 22

15

10

0
2011 2012 2013

Chart: Account Receivable Turnover in Days (DSO)

Comments:
Our evaluations of the account receivables turnover suggest that UCBL leverage days
to collect its credit sale currently are lower but it is better for the company. The firm‟s
ability to collect its credit sale has occurred in 44 days in 2011, 22 days in 2012 and
finally 23 days in 2013. The evaluation shows us an increasing trend throughout the
two years but slightly reduced in the year 2012.

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3.17.5 Debt to Total Assets Ratio:
Debt to total assets ratio measures the percentage of the total assets provided by the
creditors.

Debt to Total Assets Ratio=

2011 2012 2013

Total Debt Average Total Debt Average Total Debt Average

Total Assets Total Assets Total Assets

60410621389 5748772441 84778315078 50639323161 122059752505 11018000312

Inventory Turnover= Inventory Turnover= 16.74% Inventory Turnover= 11.80%

10.51%

Table: Debt to Total Assets Ratio

Source: Annual Report 2011 to 2013

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 Chart: Debt to Total Assets Ratio
Comments:
Debt to total assets ratio of UCBL in 2011 is 10.51%. However, in 2012, the ratio
increased to 16.47% but slightly reduced in 2013 to 11.80%. Our evaluations of the
debt total assets suggests that UCBL debt to total assets currently is lower than the
previous years, so they have the opportunity to expand their business by increasing
their debt.

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3.17.6 Debt to Total Equity Ratio:

Debt to total equity measures the percentage of total equity provided by the creditors.

Debt to Total Equity Ratio=

2011 2012 2013

Total Debt Total Total Debt Total Total Debt Total

Stockholder Stockholder Stockholder
Equity Equity Equity

60410621389 4384243039 84778315078 5705466765 122059752505 7816471892

Debt to Total Equity= Debt to Total Equity= Debt to Total Equity= 15.62%
13.85% 14.95%

Table: Debt to Total Equity Ratio

Source: Annual Report 2011 to 2013

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 Debt to Total Equity Ratio

13.85%
15.62%
2011
2012
2013

14.95%

Chart: Debt to Total Equity Ratio

Comments:
Debt to total equity ratio of UCBL in 2011 is 13.85%. However, in 2012 it has
reduced to 14.95% and in 2013 to 16.62%. Our evaluations of debt to total equity
ratio suggest that UCBL‟s debt.

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4.1 Findings:
Banks have a key role to develop the foreign exchange business in our country.
Commercial banks provide foreign exchange services to their customer. Though
foreign exchange business is challenging, it offers an excellent opportunity to
accelerate the growth of the bank‟s own business UCBL, is one of the major player in
foreign exchange business. It has been enjoying as escalating growth in foreign
exchange business. Income from the foreign exchange business has a large
contribution to UCBL‟s overall profit. The key findings are-
 Foreign exchange business has become one of the major services of revenue
for the bank.
 From the description of the foreign exchange activities of UCB, we can see
that it complies with most of the guidelines given by Bangladesh bank.
 The time series analysis gives a positive trend in foreign exchange business
covering export, import and remittance.
 The rate of shifting by the customer is low.
 Import is the most profitable part of the UCBL foreign exchange.
 The income of foreign exchange is come from two ways- commission and
exchange gain.
 In the foreign exchange risk management part, we found that UCBL is very
cautious about its risk exposure related with foreign exchange and on this
regard its treasury department has designed its own manual for proper risk
management.
 In its manual it has defined specific responsibilities of all the members
authorized for this work. The major limitation of UCBL is lack of modern
communication equipment.
 Poor condition of balance payment of UCBL
 Lack of enthusiastic scheme for exporter and importer.
 Less attractive remuneration package and motivation for the employees.
 S more and more banks are coming in the business, the market is becoming
substantially competitive.
 UCBL is facing threat with the new technologies, new services, young
energetic manpower used by emerging banks, as customers now want fast
transactions and innovations to make banking easier.

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  UCBL does not have any branch abroad which is creating problem in
remittance transfer.
 The transfer and promotion process is fair but the promotion is not faster.
 Loan facilities are very attractive to the employees of UCBL.
 Most of the policies are backdated. Only the authority amends the employees.
The employees cannot protest the injustice of the authority because the pure
trend union is absent here.
 The record keeping system is also backdated, not followed fully computerized
system properly.
 Security system of many branches is not sufficient.
 Slower in modernization comparing with its competitor
 The working environment is any branch is not congenial & appropriate. The
working desk provides sound pollution. It looks like a hall room.
 The modern technology is not used in the recruitment and selection process.
The backdated methods are not using for selection till today.
 Salary structure of UCBL is satisfactory comparing with other commercial
banks; the pension policy and the payment of pension to the employees are
very fair and transparent.

4.2 Recommendations:
Modern Commercial Banking is exacting business. The reward are modest, the
penalties for bad looking are customer. And Commercial banks are great monetary
institutions, important to the general welfare of the economy more than any other
financial institution.
Though conducting this study I have required some practical knowledge about export-
import business in Bangladesh and other relevant matters. Here, I am trying to give
some recommendation which I think might be helpful to promote the export import
business of United Commercial Bank Ltd. As per earnest observation the suggestions
are given below:
 UCBL should concentrate in increasing its profit earning capacity.
 It should effective marketing strategy to attract new customers.
 Raising the capital, statutory reserve and increase the investment.
 The number of branches should be increased.
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 Expand and diversify customer base.
 Upgrade online banking
 Recruit more skilled employees regularly.
 Bank should introduce independent „Marketing Department‟.
 Personal relationship should be built with the customers.
 Customers are the heart of the organization. They should provide more space
in the office and if possible they should have some entertainment facility.
 The employee of the branch should be trained continuously.
 Few branches are not under online banking system, so all the branches should
confirm online banking system.
 More meetings, seminars, symposiums and get together should be organized
by the branches to develop the awareness among the client of the bank.
 Ensure stable dividend.
 Ensure high level customer service.
 Bank should increase number of ATM booth.
 Should introduce one-stop service Centre.
 Bank should keep their annual report, brochure, bulletin etc. available to
provide their customer.
 Bank should introduce customer credit scheme.
 Bank should increase their space and take more care in interior decoration.
 Some new investment schemes are to be introduced for socio-economic
development and welfare of the distressed humanity.
 Finally, the bank should has the vision to automate it‟s all operations and
functionalities and should be committed to achieve the goal to be a lead bank
in the country both in service and in technical aspects and fulfill the
requirements of mass peoples.

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4.3 Conclusion:
We expect this bank review its problems toward foreign exchange business and
contribute a vital role on socio-economic perspective. Foreign exchange is always a
prominent site of business for all commercial banks. The country‟s economic growth
largely depends on this sector. Bangladesh is also economically dependent on foreign
exchange business. There are some rules and regulations and other factors (political,
economic, demographic) that influence this sector. Government should identify the
lacking and take preventive actions to smooth this lucrative path of business. Without
bank‟s co-operation, it is not possible to run any business or production activity in this
age. Export and Import need finance in various stages on their activities. Export and
import financing are letter of credit (L/C), payment against document (PAD), loan
against import merchandise (LIM) etc. All these facilities are provided by UCBL. For
this purpose Bank‟s consider the borrower‟s business standing, integrity, liability with
the bank term and condition of the L/C. There are lots of risks involved in foreign
business. So, the United Commercial Bank Limited (UCBL) has to clearly justify the
customers from natural point and gather the current information about the market. The
study of foreign exchange activities of UCBL has facilitated me with experiencing a
vast practical knowledge of banking and corporate work environment.

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